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Consumers slowed spending in September

/ Source: The Associated Press

Consumers, battered by a steep downturn in housing and a severe credit crunch, slowed spending growth in September to the weakest performance in three months.

The Commerce Department reported Thursday that consumer spending rose by 0.3 percent in September, slightly lower than the 0.4 percent increase that analysts had been expecting. Incomes grew by 0.4 percent, matching the August gain, and in line with analysts’ forecasts.

Economists are worried that consumers, the main support for the economy, may cut back on their visits to the malls in coming months as they struggle with the housing slowdown, tighter credit and now record-high oil prices.

The Federal Reserve on Wednesday cut a key interest rate for the second time in six weeks in an effort to make sure the economy does not tumble into a recession. However, the central bank also expressed concerns that surging oil prices could fan inflation pressures. Oil prices have soared to record highs in recent days.

The news about inflation from the consumer spending report was good. Prices paid by consumers on the Fed’s preferred inflation gauge rose a moderate 0.2 percent in September, excluding food and energy. This measure is up 1.8 percent over the past 12 months, inside the Fed’s comfort zone of increases in core inflation of between 1 percent and 2 percent.

In other economic news, the Labor Department said that the number of newly laid off workers filing claims for unemployment benefits fell by 6,000 last week to a total of 327,000. That was a bigger drop than analysts had been expecting.

Analysts are looking for the unemployment rate to rise slightly in coming months, reflecting a slowing economy. For September, economists believe the jobless rate remained at 4.7 percent with businesses creating a modest 80,000 new jobs. The government will release that data on Friday.